IN THE INCOME TAX APPELLATE TRIBUNAL “D” BENCH, AHMEDABAD

ITA No.1157/Ahd/2011 A.Y. 1997-98
Date of Order: 06-11-2009

Order

PER SHRI S.S. GODARA, JUDICIAL MEMBER
This assessee’s appeal for Assessment Year 1997-98, arises from order dated 30.12.2010 passed by the CIT(A)-II, Ahmedabad in case no.CIT(A)- II/CC.2/119/2009-10, in proceedings u/s.143(3) r.w.s. 254 of the Incometax Act, in short ‘the Act’.

2. The assessee raises three grounds in the instant appeal challenging disallowance of land development expenses to the tune of Rs.35,00,000/-, another identical expenditure of Rs.2,00,000/- and the one pertaining to cash payment of Rs.2,20,000/- to the payee Shri Shaffi Hussein u/s 40A(3) of the Act.

3. We come to the facts of the case now. This happens to be the second round of litigation between the parties qua the impugned issue of development expenditure paid to M/s. Modern Construction and its proprietor Shri Shaffi Hussein. The assessee-individual filed return on 29.10.1997 declaring income of Rs.1,04,48,980/- including net agricultural income of Rs.1,55,718/-. The Assessing Officer noticed that the total development expenditure of Rs.37,00,000/-, i.e., Rs.35,00,000/- and Rs.2,00,000/- had been incurred by making payment to M/s. Modern Construction for land development. He found the payment receipt to be plain and simple without giving detailed specification and measurement of the development carried out. He inter alia took cognizance of the fact that bank accounts of both these parties was in the same bank, introducer of the payee’s bank account was assessee’s brother, the bank account was operative for a limited period and the cheques in questions were deposited in the payee’s bank account and the very amount was withdrawn by self cheques. This made the Assessing Officer to issue section 131 notice to Shri Shaffi Hussein, proprietor of the payee M/s. Modern Construction. It appears that all efforts made to trace this payee entity and its proprietor did not bear fruit. The Assessing Officer completed a regular assessment on 31.03.2000 disallowing a sum of Rs.39,20,000/- towards land development. The CIT(A) confirmed the Assessing Officer’s action in order dated 27.11.2002. The Assessee filed ITA No. 302/Ahd/2001 before the Tribunal. A co-ordinate bench in its order dated 07.12.2007 remitted the issue back to the Assessing Officer for passing a fresh order as per law after taking into consideration all supporting evidence of the payee Shri Shaffi Hussein as well as the one pertaining to the genuineness of the development expenditure in question. We find from the case file that the assessee did not press grounds of Rs.2,00,000/- and Rs.2,20,000/- identical to those raised in the instant appeal. Thus, the assessee’s latter two grounds are not maintainable in the instant appeal.

4. We come to consequential proceedings now. The assessee seems to have succeeded in producing Shri Shaffi Hussein before the Assessing Officer. He stated to have carried out leveling of land, filling work and cutting of roads in the years 1996 to 1998 at Silvasa by employing some machines and dumpers. He deposed that the impugned payment of Rs.37,00,000/- came by cheque and Rs.2,00,000/- in cash. It appears that this payee did not maintain any books of account. No other evidence was laid to actually prove that any land development in question was actually carried out. The Assessing Officer in consequential assessment framed on 16.12.2009 again doubted the genuineness of the assessee’s claim by taking into account various inconsistencies in case of Shri Shaffi Hussein; for example, that he was dependent on agricultural income through out and never returned any business income etc. He accordingly disallowed the impugned development expenditure of Rs.39,20,000/-. The same now comes to Rs.35,00,000/- only. The CIT(A) has again confirmed the Assessing Officer’s action.

5. We have heard both the parties and perused the case file. Relevant facts narrated in the preceding paragraphs are not repeated for the sake of brevity. It appears that the CIT(A) obtained a remand report from the Assessing Officer. The same also went against the assessee qua the impugned claim of development expenses. The assessee submits that all the relevant record, i.e., computation, profit and loss account and balance sheet form part of the record. His case is that the impugned disallowance of Rs.35,00,000/- results in his GP being enhanced to almost 20%. The assessee further argues that the authorities below have not doubted his actual work of land development being carried out since the dispute is only qua the impugned payment made to the payee M/s. Modern Construction. The Revenue’s arguments support the lower authorities’ action. We have given our thoughtful consideration to the rival contentions. The dispute between the parties is qua the impugned land development expenditure of Rs.35,00,000/- in question. The case file reveals that neither the assessee has positively proved actual carrying out the above said land development nor the authorities below have referred to any spot inspection to ascertain the ground position. Both parties in these peculiar facts have failed to discharge their respective onus. We feel in these circumstances that larger interest of justice be met in case the impugned land development expenditure disallowance of Rs.35,00,000/- (supra) is disallowed @ 50%, i.e., Rs.17,50,000/- and the remaining 50% claim amount is accepted. We quote above narrated peculiar facts and order accordingly. This order shall not be treated as a precedent. The assessee’s first substantive ground is partly accepted. The latter two grounds are declined as not being maintainable in this second round (supra).

6. This assessee’s appeal is partly allowed.

Order pronounced in the Court on this day, the 6th November, 2015 at Ahmedabad.

Sd/-                                                   Sd/-
(PRAMOD KUMAR)                 (S.S. GODARA)
ACCOUNTANT MEMBER        JUDICIAL MEMBER